A Structure for Strategic Agility
Navigating
the tension between maintaining a stable business model that has
produced consistent results and embracing reinvention is a difficult
challenge for most companies. Strategic stability can be quite
rewarding and is the hallmark of great companies such as Wells Fargo,
Southwest Airlines, Walmart, and Walt Disney. But there are also many
once-dominant companies whose strategies became obsolete faster than
they were able to respond to shifting market and competitive
conditions—for example, Blockbuster and Research in Motion, two
companies cited in Accelerate.
In
Kotter’s view, businesses today cannot afford to be complacent.
(Can they ever?) Yet he offers a convincing portrait of a typical
organization’s life cycle to demonstrate that, despite their best
intentions, most companies naturally lose their innovative edge as
they evolve. As he depicts it, successful startups have a strong,
market-focused vision, delineated initially by the entrepreneur
founder. The company is more of a network than a pyramid. At the
center is the entrepreneur and his or her closest advisors; linked to
them like planets in a solar system are people managing various
initiatives, often associated with developing and testing new
products and services. At this stage, the organization chart is
relatively flat and the company is fluid; a once-promising initiative
can be dropped on the fly in favor of a better idea. “This kind of
agility can enable a successful young firm to run circles around more
mature competitors,” Kotter writes.
Most
companies naturally lose their innovative edge as they evolve.
With
success, however, come formal processes and a management structure—an
operational hierarchy to ensure that the company can satisfy its
growing market. At the same time, the original entrepreneurial system
does not fade away. The hierarchy and the network coexist to drive
efficiency and innovation, respectively. This period, Kotter
contends, is extraordinary, marked by widening profits, an excellent
culture, and favorable capital markets. Unfortunately, the phase is
usually short-lived. As growth escalates, operational needs expand,
and before long, the hierarchy, which increasingly controls company
resources, begins to dwarf and minimize the network. At the end of
this evolution, the company may have a strong market position, great
brands, good relations with customers, and economies of scale, but it
will have lost its agility and innovative edge. In other words, it is
now vulnerable to attack from a nimbler startup.
Given
this inevitable progression, Kotter argues, the only way to sustain
market share and simultaneously beat the competition into new markets
is to re-create the dual operating system that the company had when
it was at its best. The left side of the company would consist of the
traditional business and its hierarchy; the right side would be
populated by a “volunteer army” led by a “guiding coalition”
overseeing a dynamic network, free of bureaucratic layers, whose job
would be to drive strategic initiatives that would stall if relegated
to the left-side bureaucracy. Kotter’s five principles for forming
and managing this network are the accelerators of the book’s title.
To
support his point of view, Kotter tells the story of an unnamed B2B
technology company whose global market share was tumbling primarily
because it lagged behind competitors in Asian expansion and new
product development. Within two years of implementing the
dual-operating approach, the company experienced a marked turnaround:
Annual revenue growth more than doubled, to more than 60 percent, and
the company rose from fourth to second in market share. Moreover, the
company’s market capitalization ballooned 155 percent, to $10
billion-plus.
Because Accelerate delivers
such a potentially valuable message, the fact that it does not
address the significance of coherent strategy as a prerequisite for
successful innovation creates a big hole. Absent that discussion,
it’s unclear, for example, how the right-side network’s
purpose—to make strategy and its implementation more agile—is
aligned with the company’s strategy itself. Some aspects of
strategy, such as pricing the value proposition or changing the
portfolio, can be remixed relatively quickly and frequently; but
other elements, such as the capabilities that differentiate a
business or the types of customers it chooses to target, cannot be
altered overnight.
Nevertheless,
as a new way of looking at agility and flexibility, Kotter’s thesis
is extremely appealing. It presents a valuable course of action that
speaks to a particularly challenging conundrum for maturing
companies—that is, how to combine the dexterity of the startup
years with the knowledge gained from experience. For this reason, I
choose Accelerate as
the best business book of the year on strategy. It brings much-needed
insight as to why big companies struggle with implementing strategic
innovation, and it recommends a practical approach to solving that
problem. In doing so, it has the potential to bring inside the walls
of our most successful enterprises the benefits of creative
destruction.
http://www.strategy-business.com/article/00287?pg=all
No comments:
Post a Comment